Is Singapore hitting the skids as electronics hub?

SINGAPORE  Despite this city-state's loss of some manufacturing operations to cheaper destinations such as China and Malaysia, officials and analysts insist Singapore can still count on its skilled workforce, first-rate infrastructure and pro-business policies to maintain its status as an Asian electronics hub.

Lim Swee Nian, director for electronics at Singapore's Economic Development Board (EDB), acknowledged that the emergence of lower-cost locations "will always pose a challenge to Singapore" but said the country saw itself "competing on the grounds of overall costs instead of just labor costs alone."

This year has proved to be mixed for Singapore's electronics industry, with companies such as hard-drive maker Maxtor and consumer electronics firms Creative and Aiwa all cutting jobs or shifting manufacturing elsewhere. In July, National Semiconductor
announced the closure of its local facility to consolidate production at its other assembly and test plants in Melaka, Malaysia and Suzhou, China. In August, Agilent Technologies announced the sale of its
Singapore-based semiconductor operations and the transfer of some1,800 local staff to two private equity buyers.

Gartner semiconductor analyst Philip Koh said the reallocations were the culmination of a trend that began in the 1990s with China's emergence as an economic power. "We saw China start to suck more electronic equipment manufacturing, not only from Singapore but also from Malaysia and Indonesia," he
said. "In recent years more and more manufacturing has been shifted to the mainland. Companies are looking for lower-cost destinations, especially in manufacturing, to make their products more cost
competitive."

Koh said Singapore's ability to attract investment in more leading-edge technologies would prove the deciding factor in the continued success of its manufacturing sector, which currently accounts for about a quarter of the economy.

"Singapore needs to continue to move up the value chain in order to stay competitive in the semiconductor industry," he said. Singapore is moving "towards value-added/high-end manufacturing and also into the R&D marketplace, where we continue to attract IC design, product and investments."

Koh added that Singapore should concentrate on developing its front-end wafer fabrication capabilities, expanding on the 14 fabs based here already.